Tuesday, July 20, 2010

Wake Up Project on Livestream

Monday, July 12, 2010

Oil Spill Timeline

Oil Spill Timeline from RightChange on Vimeo.

He isn't leading, he is following orders.... this whole disaster is orchestrated by George Soros. (a communist billionaire who made his dough on weapons and crashing the british pound - guess what he is doing now?) it's all a plan to destroy America and the dollar for "global governance" = global communism! THe plan is to cancel our oil drilling and send all drilling to Brazil. where Soros invested in Petrobras (state owned oil co that found a new oil reserve deep u;nderwater outside of Brazil) Soros got Obama to promise Petrobras $2billion investment ..... then they got BP to put $20 Billion in an account - guess where $2B is going....? meanwhile all other oil rigs in Gulf is moving on down to Brazil - just as planned....while US looses jobs, $$$, industry, our environment. Speaking of..... the goal here is to push through Cap and trade... = taxing the air we breath....for more control of the world.... but wasn't Cap & trade supposed to "save" the environment....? NO - has nothing to do with it. it's all about money and control and communism. They have no regard for anyone or the environment. it's all a scam

Friday, July 2, 2010

Middle class families face a triple whammy

Falling pensions, cuts and the banking crisis will impoverish many families, says Edmund Conway.

By Edmund Conway
Published: 9:05AM BST 01 Jul 2010

You don't usually expect radical neo-Marxism from the International Monetary Fund – the last great bastion of capitalism, spreading the gospel about the free market to the furthest reaches of the world. And yet, hidden away in an obscure IMF report a few years back is a short sentence that explains precisely the problems that Britain, and the rest of the Western world, have been sleepwalking towards for years.

The claim made by the IMF's Financial Stability Report in 2005, in a seemingly throwaway remark, was that households had become the financial system's "shock absorber of last resort". In other words, whereas in previous eras, much of the pain of recession and financial crisis was borne by businesses or governments, with families afforded some degree of protection by the pensions system or welfare state, it was now households who were far more likely to face the music.

At the time, the idea received little attention. But it has truly radical implications for economics and politics around the world. This is not merely about the financial crisis, but something more deep-seated: the way in which wealth is distributed around society. It is about the middle classes, and why they have become the biggest victims of all.

The problem is that families face a threefold threat to their prosperity. The first issue – the one that the IMF was originally focusing on – is pensions. Not so long ago, households were lucky enough to receive gold-plated pensions that would guarantee a certain pay-out upon retirement. Most companies have closed their schemes after realising they are simply unaffordable. The public sector at last looks like following suit, if the BBC's decision this week to reduce the generosity of its pension plan is anything to go by.

This is, in the IMF's words, a "quantum leap". Suddenly households have gone from being able to rely on a constant stream of legally protected income from their employer to having to manage their own investments (as they technically do under the new breed of pensions).

This would be fine if one could be assured that most people would have either the time or the inclination to understand these new responsibilities. But every piece of evidence – academic and anecdotal – suggests that they do not. The result is that the majority of households are heading blindly towards a future of relative poverty.

The second issue is that the welfare state has become unaffordable, and yet many of Britain's poorest families have become overly reliant on it. Here, too, there is to be a reckoning. Whereas Gordon Brown used his first Budget to save money by grabbing an annual £6 billion from pension funds (and the middle class), George Osborne used last month's emergency Budget for a similar-sized grab on the welfare class. Re-indexing tax credits against a lower measure of inflation will cost Britain's poorest families billions by the end of this parliament.

And it is not merely that the middle class and the poorest have found themselves squeezed so hard: it is that so much of the extra cash generated during the boom years (and even after them) has been actively funnelled towards the most wealthy. The median wage in the US, adjusted for inflation, has been stagnant for pretty much three decades. But the figures at the high end of the scale have soared; whereas in 1970 the average US chief executive made $25 for every dollar of their typical employee's salary, today the figure is more like $90.

Much of this disparity is down to globalisation. When the world is changing fast, those qualified to deal with the technology du jour (be it the steam engine or the internet) will earn more than their peers. But the fact remains that not only is inequality at the highest level since the Thirties, the pension and welfare systems set up then for the express purpose of levelling this divide are in an exponential decline, threatening to widen the gulf further.

Moreover, there is good reason to suspect, as Raghuram Rajan points out in his new book, Fault Lines, that policy-makers have only been able to persuade people to live with this manifestly unfair situation by pumping up ever bigger booms in the property and stock markets to give them the impression that they are actually making money. Now that the bubble has burst and debt is harder to procure, that illusion has evaporated.

All this before one even takes into account the third problem for households – that they are having to bear the costs of the clean-up for the financial crisis. The austerity budgets being imposed across Europe will mean that families are taxed more and receive less in the way of welfare and public services. Police numbers will be cut; university fees are likely to rise further. In other words, the cost of trying to live a stable, contented middle-class life will balloon.

So I have one simple question: when do the politicians intend to let the public know about the fate that awaits them? The longer they put it off, the nastier the reaction, the bigger the strikes and the greater the chance that governments will fall. Don't say you weren't warned.

Fed Made Taxpayers Unwitting Junk-Bond Buyers

Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in “assets” the government agreed to purchase in the rescue of Bear Stearns Cos. were “investment-grade.” They didn’t share everything the Fed knew about the money.

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds.

By using its balance sheet to protect an investment bank against failure, the Fed took on the most credit risk in its 96- year history and increased the chance that Americans would be on the hook for billions of dollars as the central bank began insuring Wall Street firms against collapse. The Fed’s secrecy spurred legislation that will require government audits of the Fed bailouts and force the central bank to reveal recipients of emergency credit.

“Either the Fed did not understand the distressed state of some of the assets that it was purchasing from banks and is only now discovering their true value, or it understood that it was buying weak assets and attempted to obscure that fact,” Senator Sherrod Brown, an Ohio Democrat and member of the Senate Banking Committee, said in an e-mail when informed about the credit quality of holdings in the Maiden Lane LLC portfolio. The committee held the April 3 hearing.

Bear Stearns Purchase

Maiden Lane, named for a street bordering the New York Fed’s Manhattan headquarters, was created to hold the assets the central bank acquired to facilitate JPMorgan Chase & Co.’s purchase of Bear Stearns.

The Fed disclosed the Maiden Lane holdings in March after Bloomberg News went to court using the Freedom of Information Act, and the U.S. District Court in New York held that the Fed should release documents related to Bloomberg’s request.

“The Federal Reserve was not straightforward with the American people regarding the risks they were taking with taxpayer money, despite my efforts to obtain such clarity at the time,” U.S. Senator Richard Shelby of Alabama, the Senate Banking Committee’s top Republican, told Bloomberg News. “It is apparent that the Fed withheld from the Congress and the public material information about the condition of these securities.”

Downgraded to Junk

When Bernanke and Geithner testified in April 2008, $42 million of the CDO securities the Fed would eventually buy had been downgraded to junk, data compiled by Bloomberg show. By the time the central bank funded its $28.8 billion loan to Maiden Lane 12 weeks later, about $172 million of such securities the Fed purchased were rated below investment grade, according to data compiled for Bloomberg by Red Pine Advisors LLC, a New York firm specializing in the valuation of complex, illiquid securities.

CDOs bundle assets ranging from mortgage bonds to high- yield loans and divide them into new slices, or tranches, of varying risks. High-yield, or junk, bonds are those rated below Baa3 by Moody’s Investors Service and lower than BBB- by Standard & Poor’s.

“As was noted in testimony, all of the cash securities in the Maiden Lane portfolio were investment grade on March 14, 2008, when the deal was agreed to in order to facilitate the acquisition of Bear Stearns and to prevent the systemic consequences of its sudden and disorderly failure,” Michelle Smith, a spokeswoman for the Fed’s Board of Governors, said in an e-mail.

Recover Principal

“The Federal Reserve considered not just credit-rating valuations, which have varied some over time based on economic conditions, but also relied on a separate assessment from an independent investment firm, which advised us that over time, we would likely fully recover our principal and interest,” Smith said. “We continue to expect the loan to Maiden Lane to be fully repaid.”

The Fed valued the loan at $27 billion as of the end of last year, $1.8 billion below the amount that was funded in 2008, according to financial statements audited by Deloitte & Touche LLP.

More than 88 percent of Maiden Lane’s CDO bonds and 78 percent of its non-agency residential mortgage-backed debt are now speculative grade, according to data compiled by Bloomberg based on holdings as of Jan. 29.

Securities, Derivatives

The nonagency home-loan bonds and CDO securities made up about 44 percent of the $74.9 billion in face amount of Maiden Lane’s assets, Fed data show. Maiden Lane also contains commercial real-estate loans and other mortgage debt. The central bank hasn’t released how or at what prices it has valued the securities and derivatives, which are contracts whose values are tied to assets, including stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.

Being “investment grade” was a requirement for Maiden Lane’s bonds even after Bernanke and Geithner publicly criticized inflated ratings for helping to cause the financial crisis.

“The complexity of structured credit products, as well as the difficulty of determining the values of some of the underlying assets, led many investors to rely heavily on the evaluations of these products by credit-rating agencies,” Bernanke said in a January 10, 2008, speech in Washington. “However, as subprime-mortgage losses rose to levels that threatened even highly rated tranches, investors began to question the reliability of the credit ratings and became increasingly unwilling to hold these products.”

Princeton, Dartmouth

Members of Congress pressed Bernanke, who received a doctorate in economics from the Massachusetts Institute of Technology and served as chairman of Princeton University’s economics department, and Geithner, a Dartmouth College graduate who earned a master’s degree in economics and East Asian studies from Johns Hopkins University, about the quality of the assets during the April Bear Stearns hearings.

“You’ve got about $30 billion of collateral. And some comments have been made that you feel comfortable because it’s highly rated,” Senator Jack Reed, a Rhode Island Democrat, told Bernanke, according to a transcript. “But a lot of highly rated collateral these days is being subject to questions.”

“Senator, as was mentioned, it is all investment-grade or current performing assets,” Bernanke responded. “We do not know for sure what will transpire,” he said. “But we have engaged an independent investment-advisory firm who gives us reasonable comfort that if we can sell these assets over a period of time that we will recover principal and interest for the American taxpayer.”

Chances for Loss

When asked by Shelby during the hearing what the chances were for a loss, Robert Steel, then the U.S. Treasury undersecretary for domestic finance, said the transaction “was $30 billion, approximately, of collateral, all investment-grade securities, all of them current in interest and principal.”

Steel, who was named deputy mayor for economic development last month by New York City Mayor Michael Bloomberg, declined to comment through Andrew Brent, a spokesman for the mayor’s office. The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.

Bernanke and Geithner didn’t detail during the hearing that the Fed would expose itself to below-investment-grade assets through credit derivatives it was also acquiring. The $16 billion of credit-default swaps included bets protecting some junk-rated asset-backed securities against default, according to two people familiar with the agreement who declined to be identified because the terms weren’t made public.

‘Related Hedges’

The Fed hasn’t disclosed how much was tied to below- investment-grade debt. Geithner, who is now Treasury secretary, said in an addendum to the text of his remarks only that the Fed was assuming “related hedges,” without elaborating.

Credit-default swaps are used to hedge against losses or to speculate on creditworthiness. The derivatives pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt.

“I strongly object to the mischaracterization of the portfolio,” Sylvain Raynes, a principal at R&R Consulting in New York, said in an interview. “The ratings that were purportedly investment-grade had long lost their utility” and to call several billion dollars of derivatives “related hedges” is “nonsense” and a “material omission.”

So-called hedges aren’t without risk, said Raynes, who is also co-author of “Elements of Structured Finance,” which was published in May by Oxford University Press. “You can be on the wrong side of a hedge, by definition. Which side are they on?”

Shrinking Holdings

Maiden Lane has been unwinding its credit-default swaps, according to the people familiar with the agreement. The holdings shrank to a face amount of $11.8 billion in December 2008 and $7.3 billion at the end of last year, according to its financial statements.

Of the $7.3 billion, $2.45 billion were contracts guaranteeing debt against default, including $2.1 billion of junk-rated securities. The bank valued the credit swaps it sold at a $1.8 billion loss, according to the 2009 statement.

Overall, Maiden Lane assumed more bets against securities than for them, the people familiar with the agreement said. The market value of its entire swaps book, including more than $3 billion of interest-rate contracts, was $1.13 billion as of Dec. 31, 2009, according to year-end financial statements.

The Senate Banking Committee also called JPMorgan Chief Executive Officer Jamie Dimon to testify on the Bear Stearns deal on April 3, 2008.

Riskier, More Complex

“The assets taken by the Fed consist entirely of loans that are current and rated investment grade,” Dimon said, according to a transcript. “We kept the riskier and more complex securities in the Bear Stearns portfolio for our own account. We did not cherry-pick the assets in the collateral pool.”

If the Fed hadn’t engineered the takeover, “the consequences could have been disastrous,” Dimon said.

JPMorgan didn’t pick the individual securities for Maiden Lane, Geithner said in an annex to his April 2008 testimony. Instead, it selected groups of assets that met criteria set by the central bank, and the Fed and its adviser, New York-based BlackRock Inc., reviewed those assets, according to one of the people familiar with the agreement. As part of the bailout, JPMorgan agreed to absorb the first $1 billion in losses.

Assets, Liabilities

JPMorgan had to weigh how many real-estate assets it could absorb against its existing inventory, Dimon said, adding that the New York-based company acquired about $360 billion of Bear Stearns assets and liabilities in the transaction.

JPMorgan spokesman Justin Perras declined to comment further on Maiden Lane.

“We certainly had doubts at the time: Why wouldn’t JPMorgan want a bunch of AAA assets?” said Mark Calabria, a former Senate Banking Committee staff member who was present at the April 2008 hearings and is now director of financial- regulation studies at the Cato Institute in Washington. “The answer is it was all borderline junk.”

The average CDO security was cut 7.6 grades by Moody’s and 7.3 levels by S&P in the 22 months between the time the Fed funded the loan and April 2010, according to Red Pine.

“That is quite steep,” said Wade Vandegrift, a Red Pine partner. “The default rates and the delinquency rates of these deals were a significant multiple of even the worst-case projections that rating agencies and other people projected.”

Foreclosed Loans

WaMu Asset-Backed Certificates Series 2007-HE1 M2, a $4.1 million mortgage-bond position the Fed acquired, was backed by home loans originated by the subprime-lending unit of Washington Mutual Inc., the Seattle-based thrift that went bankrupt in September 2008. As of March 2008, the month Bear Stearns collapsed, more than 26 percent of the loans were at least 60 days late, in foreclosure or the properties had already been seized, according to data compiled by Bloomberg.

Three weeks after the Fed agreed to the Bear Stearns rescue and four days after Bernanke’s April testimony, Moody’s cut the security to junk. S&P followed a month later and now rates it D.

“It is hardly surprising or particularly newsworthy that the value of” the Maiden Lane “portfolio deteriorated in the midst of the worst financial crisis in generations, but it is unlikely that the taxpayers will lose a dime on the government’s loan,” Treasury spokesman Andrew Williams said in an e-mail. The Congressional Budget Office estimates the Fed will make $200 million on Maiden Lane from inception through 2020.

Demanding Accountability

Billions of dollars in Fed loans -- some possibly involving subsidies for the biggest banks and corporations -- remain secret, and Congress is demanding more accountability from the Fed than at any time in its history.

House and Senate negotiators agreed on the sweeping Dodd- Frank Wall Street Reform and Consumer Protection Act last week, which requires the Government Accountability Office to audit the Fed’s emergency loans and forces the Fed to reveal recipients of such credit by Dec. 1. The House approved the measure 237-192 yesterday. It awaits approval by the Senate and will then go to President Barack Obama for his signature.

Vermont Senator Bernard Sanders wrote the legislation requiring an audit of Maiden Lane and other credit facilities. The act also would make it more difficult for the Fed to provide emergency loans in the future.

“We need to lift the veil of secrecy at the Federal Reserve,” Sanders, an independent, told Bloomberg News when informed about the credit quality of Maiden Lane’s holdings. “We need a complete and independent audit. The American people have a right to know what the Fed is doing with trillions of their taxpayer dollars.”

To contact the reporters on this story: Caroline Salas in New York at csalas1@bloomberg.net Craig Torres in Washington at ctorres3@bloomberg.net Shannon D. Harrington in New York at sharrington6@bloomberg.net

U.N. committee calls for dumping the U.S. dollar

UNITED NATIONS, July 1 (UPI) -- A U.N. committee is the latest advocate of dumping the U.S. dollar in favor of a replacement currency though it doesn't say -- or know -- which to turn to.

The dollar has been challenged as a global currency for a variety of reasons -- from populist grandstanding to polarized political critics of the United States seeking to go separate ways.

Former Iraqi President Saddam Hussein opposed the dollar's use for the oil trade and Iran, before the eurozone crisis, wanted the dollar replaced by the European common currency for hydrocarbon transactions.

The latest clamor for displacing the dollar as a global currency rose after the 2008 economic downturn which, the U.N. committee said, showed the U.S. currency was ill-equipped to defend international trade.

The U.N. Department of Economic and Social Affairs, in a report, called the dollar an unreliable international currency that should be replaced by a more stable system.

"The dollar has proved not to be a stable store of value, which is a requisite for a stable reserve currency," the report said.

Countries with massive dollar reserves have seen their funds undervalued as a result of the dollar's troubles and impacted adversely on their import trade.

The report cited support for a standardized international system for liquidity transfer that would remove dependence on storing up reserves in a particular currency. Instead, it backed special drawing rights made up of a basket of currencies.

Under an existing system, the value of special drawing rights is determined by the International Monetary Fund. The IMF also can made adjustments in currency rates in response to market fluctuations.

The United Nations says it supports the initiatives and hopes that finding alternatives to the dollar will help sustain the international trade and financial systems and allow

less-developed countries to participate more fully into the global economy.

Getting "back on track" will require significant reforms in global economic governance and new thinking to put the world on a more sustainable path of development, said the report.

"This year's report looks at the prospects for post-crisis global development and concludes that a major rebalancing of the global economy is needed to make it sustainable," said Rob Vos, the director of the development policy and analysis division of the Department of Economic and Social Affairs.

"To that end, it argues for much more effective mechanisms of global economic governance, requiring a major overhaul of the existing ones," he told reporters at the launch of the report.

Vos said many of the global crises in recent years, including fuel and food crises, were caused to a large extent by systemic failures in the global economy and weaknesses in the mechanisms for global governance.